You would never expect a homeowner to cancel the deal after going through the effort of listing and accepting an offer on a home. So what would prompt a person to back out and is there anything that you can do about it?
Why Would a Seller Want to Cancel the Contract?
Real estate sales often span a month or two and during that time it’s possible for a seller to have second thoughts or to be put in a compromising situation that makes it difficult to complete the transaction.
Change of Heart
Selling a home can be emotional, especially if the property has sentimental value. Sometimes a seller is not ready to part ways with a family home where fond memories were made. Once a homeowner starts going through the motions and reality sets in, he or she could get cold feet.
Triggering Life Events
Other times, a seller fully intends on going through with the sale but life circumstances prevent the person from moving forward. Job relocations, pregnancy, illness, divorce, a death in the family – these sorts of life events can’t always be predicted and can impact a seller’s willingness or ability to close.
Appraisal Comes in Low
Purchase contracts are riddled with roadblocks, one of them being the home appraisal. If you’re financing a property and the home does not appraise, you may look to the seller for a reduction on price. If the seller is unwilling to match the appraisal, he or she could come back to you to cover the difference or threaten to terminate the contract.
Seller Cannot Find a New Home
Typically where the seller moves after you purchase the home is none of your business. The exception occurs when a clause in your real estate contract states that the sale is contingent on the seller finding suitable housing. It becomes a big problem if the owner can’t secure a new home to move into. If the clock is winding down, the homeowner may request more time or pull out of the deal entirely as the deadline looms.
What Should You Do if You Learn That the Seller Wants to Cancel Mid Transaction?
Most real estate transactions require the buyer to deposit funds into an escrow account to hold the property. The money can only be released back to the buyer under specific circumstances. A buyer who decides to cancel a contract risks forfeiting his or her deposit money, which is often between 1 and 5 percent of the purchase price. But, what about the seller? Since the homeowner doesn't have money on the line, what recourse do you have if he or she decides to walk?
Consider the Seller’s Situation
I’ve said it before and I’ll say it again: Real estate is a people business and each transaction is unique because of the parties involved. If the seller is backing out because of cold feet, you may not have much sympathy. After all, couldn’t the person have figured this out earlier? However, what if the seller is facing a serious life challenge, like illness? Under certain circumstances you may decide to let the homeowner off the hook scot-free.
Is There a Way to Salvage the Sale?
Once you understand the seller’s reasoning, you can brainstorm ways to keep the deal on track. If the person is emotional about parting ways with a family home, you could try sending a letter to put his or her mind at ease. Reassure the seller that the property will be taken care of and is in good hands. If the seller hasn’t been able to identify a new home to move to, you can consider giving the person more time by negotiating an extension or a lease back.
Bring in Your Attorney
If there doesn’t seem to be a path forward, your best bet is to bring in legal counsel to review options. A fully executed written real estate contract is legally binding. So if you want to take legal action to hold the seller responsible, you likely have a case. An attorney can provide guidance on whether you can hold the seller accountable for his or her breach of contract or liable for the damages that you’ve incurred. Here are a few ways it could be resolved:
Move on: If you have put a substantial amount of time, resources and money into the process, it’s perfectly normal to feel upset. Some buyers decide not to waste any more energy on dead deals. They chalk it up to bad luck and allow the sellers to break the contracts without any penalty.
Try and settle: You may be able to settle things outside of court by requesting that the seller reimburse you for damages. Depending on how far into the deal you are, you may have already incurred costs related to the inspection, loan process and temporary housing.
Go to court: If you decide to sue the seller, you may have a shot at forcing the person to complete the transaction or compensate you for financial hardship that resulted from the breach of contract.